Slaying energy dragons

Aug. 9, 2010
The US government too often errs on energy by using policy as a sword with which to slay dragons.

The US government too often errs on energy by using policy as a sword with which to slay dragons. It overdramatizes problems—nearly always having to do with price or the environment—in isolation from larger systems. And it overreacts, sometimes creating crisis where none existed before.

A favorite dragon in some quarters of government is "dirty oil"—bitumen or synthetic crude from the vast oil sands and heavy oil deposits of Alberta. The production and processing of bitumen require the use of energy at rates beyond those typical of conventional oil. Usually, combustion of hydrocarbons fills the need. So an extra increment of greenhouse gas enters the atmosphere, and environmental activists and their political friends brand the oil as dirty.

Stalking dirty oil

Liberal politicians have been stalking the dirty-oil dragon for several years. One of their weapons is the low-carbon fuel standard, a statutory limit on the amount of carbon dioxide emitted per unit of energy supplied. The formula can be written so as to punish if not prohibit oil products derived from bitumen. California, ever eager to lead the nation into energy mistakes, enacted such a standard in 2007. Federal lawmakers have written low-carbon fuel standards based on California's model into energy bills that so far have not been passed. The lingering threat is a matter of no small concern in Canada.

Last month, Rep. Henry Waxman (D-Calif.), chairman of the House Committee on Energy and Commerce, swiped at the dirty-oil dragon with a different weapon: resistance to a pipeline designed to carry crude from Alberta to the southern US. He's challenging adequacy of an environmental impact statement released in April by the State Department for the proposal by TransCanada to extend its Keystone system to Gulf Coast refineries. Producing and upgrading bitumen, he wrote in letters to State Department officials, including Sec. of State Hillary Clinton, yields "roughly three times greater greenhouse gas emissions than producing conventional oil on a per-unit basis."

Waxman colors the dragon in tones unjustifiably dark. Even for the most energy-intensive methods, extraction and processing account for little more than 20% of all greenhouse gas emissions associated oil products derived from oil sands. When product combustion is included in the comparison, emissions related to oil sands exceed those of conventional crude by 15% or less. And producers and upgraders have steadily lowered emission rates, making impressive technical progress that politicians should not want to discourage.

A new study commissioned by the National Petrochemical and Refiners Association says slaying the dirty-oil dragon in Canada in fact might increase emissions of greenhouse gases overall. The reason: Canadian crude would find its way to markets not limited by low-carbon fuel standards, and the US would replace the supply with crude from sources farther away. As a result, concludes Barr Engineering Co. of Minneapolis, crude transport would jump, raising total emissions because of the increased tanker traffic.

Supporters of low-carbon fuel standards will of course challenge the study's numerical findings. But they can't escape criticism for ignoring broader implications of their proposals. The slaying of narrowly defined energy dragons usually creates more problems than it solves.

Prominent dragon

It even can be self-contradictory. A dragon too prominent in energy politics these days is US reliance on oil from countries depicted as hostile. While the characterization fits the governments of some exporters—Venezuela and Iran, for example—it doesn't apply to most. The exaggerated hostility of oil exporters shouldn't guide energy discourse to the extent it does. If that were not so, however, if the international oil market really were dominated by sellers wishing only the worst for the US, would it not make sense to import as much as possible from a friendly neighbor and important trade partner?

Dragon-slayers don't see connections like that. They see only what might make them look heroic. With energy, most monsters needing the swift blade are the policy mistakes bred by just such self-serving myopia.

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